What to do with £80k to get the best "safe" benefit

ColdIron

Elika0215 wrote: »

Hmm. So, is it safer to drip money in to an investment per month or invest a lump sum?

Neither is inherently safer. Statistically, over most time periods, lump sums produce higher returns but drip feeding provides a powerful psychological advantage that has a value of its own

kidmugsy

Ages 49 and 48: they have £80k sitting in a savings account that they've had for years.

They have a repayment mortgage of £60k at about 2% p.a. with about 14 years left on it (about £400 a month).

Their income is pretty tight with their expenditure.

They want to minimise risks associated with shares and the like.

One is unemployed due to a disability. The other partner earns in the region of £15k py.



It seems to me that the best bet is

(i) to pay off the mortgage either in one go or as quickly as is penalty-free.

(ii) to put their emergency cash fund in places where it will earn more than 0.5% p.a.

(iii) To contribute £2,880 net (= £3,600 gross) to a pension for the unemployed one, with a view to drawing it down tax-free once she (or he) is 55.

(iv) To contribute enough to a pension for the employed one to maximise employer contribution.

None of these need involve investing, or investing much, in stocks and shares. For example the money in (iii) could be left as cash, or some other very conservative investment, in the pension, rather than being invested for hoped-for growth.

If they don't already do so, they might look at ways of minimising outgoings, such as using the Santander123 Lite account to get a cashback on their monthly bills.

atush

Pay off the mtg, boost pensions, open a S&S isa.

Stocks and shares? No- comapnies can and do fail on occasion. Funds, which hold shares in tens if not hundreds of companies is what to look for. So you wont loose the lot. Or a mutliasset fund that holds some share, but holds other assets too.

in the last decade, while they were getting 0.5% interet, their money was shrinking with inflation. While my 80K invested in funds grew substantially.

Elika0215

xylophone wrote: »

Are they allowed a penalty free lump sum mortgage repayment each year?

For example, on a five year fix, it might be 10% of the mortgage outstanding.

They've had a reply saying that they can pay £11,940 and it renews every year on May 1st. So, I assume that means they can effectively pay just under £24,000 without penalty in the next six months.

So, with the advice on here, that seems like a no-brainer, right?

Oh and they're on a 5 year fixed mortgage (2 years in) 1.94% interest rate. Not sure if that's relevant.

Last question for now(!); Is there a financial gain (or less of a loss) to pay it 1) to reduce the term or 2) reduce the premiums?

kidmugsy

Elika0215 wrote: »

They've had a reply saying that they can pay £11,940 and it renews every year on May 1st. So, I assume that means they can effectively pay just under £24,000 without penalty in the next six months.

So, with the advice on here, that seems like a no-brainer, right?

Oh and they're on a 5 year fixed mortgage (2 years in) 1.94% interest rate. Not sure if that's relevant.

Last question for now(!); Is there a financial gain (or less of a loss) to pay it 1) to reduce the term or 2) reduce the premiums?

I can't answer your question but I can say that they want to look carefully at the T&Cs so that they time the overpayments to maximise their gains. That might anyway answer your question. It's even conceivable that the two payments might best be used in the two different ways you mention.